Synventive Acquisition Inc. and Subsidiaries Exhibit 99.2
CONSOLIDATED BALANCE SHEETS
June 30, 2012 and December 31, 2011
(Dollars in thousands) |
| | | | | | | |
| | (Unaudited) June 30, 2012 | | December 31, 2011 |
| Assets | | | |
| Current assets | | | |
| Cash | $ | 7,965 |
| | $ | 11,194 |
|
| Bank acceptances | 2,275 |
| | 1,349 |
|
| Accounts receivable, net | 42,744 |
| | 38,647 |
|
| Inventories, net | 9,837 |
| | 10,457 |
|
| Prepaid expenses and other current assets | 1,819 |
| | 1,309 |
|
| Deferred income taxes | 787 |
| | 787 |
|
| Total current assets | 65,427 |
| | 63,743 |
|
| | | | |
| Property and equipment, net | 11,971 |
| | 12,468 |
|
| Deferred income taxes | 258 |
| | 255 |
|
| Goodwill | 22,564 |
| | 22,530 |
|
| Intangibles, net | 9,451 |
| | 9,844 |
|
| Total assets | $ | 109,671 |
| | $ | 108,840 |
|
| | | | |
| Liabilities and Stockholders' Equity | | | |
| Current liabilities | | | |
| Current portion of capital lease obligation | $ | 121 |
| | $ | 209 |
|
| Accounts payable | 12,200 |
| | 13,877 |
|
| Accrued expenses | 10,196 |
| | 13,690 |
|
| Customer deposits | 1,225 |
| | 1,287 |
|
| Deferred income taxes | 227 |
| | 227 |
|
| Total current liabilities | 23,969 |
| | 29,290 |
|
| | | | |
| Capital lease obligation, net of current portion | 52 |
| | 36 |
|
| Long-term debt | 58,050 |
| | 59,803 |
|
| Accrued pension liability | 338 |
| | 351 |
|
| Related party payable | 140 |
| | 15 |
|
| Deferred income taxes | 9,414 |
| | 9,444 |
|
| Total liabilities | 91,963 |
| | 98,939 |
|
| | | | |
| Stockholders' equity: | | | |
| Unrestricted common stock | 6 |
| | 6 |
|
| Paid in capital | 50,070 |
| | 49,918 |
|
| Accumulated deficit | (23,779 | ) | | (32,265 | ) |
| Accumulated other comprehensive loss | (8,733 | ) | | (7,929 | ) |
| Total Synventive Acquisition, Inc. and Subsidiaries stockholders' equity | 17,564 |
| | 9,730 |
|
| Noncontrolling interest in subsidiary | 144 |
| | 171 |
|
| Total stockholders' equity | 17,708 |
| | 9,901 |
|
| Total liabilities and stockholders' equity | $ | 109,671 |
| | $ | 108,840 |
|
See notes to consolidated financial statements.
Synventive Acquisition Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Month Periods Ended June 30, 2012 and July 2, 2011
(Dollars in thousands)
(Unaudited)
|
| | | | | | | | | | | | | | |
| | | | | | | | 2012 | | 2011 | |
| | | | | | | | | | | |
| Net sales | | | | | | | $ | 78,699 |
| | $ | 68,876 |
| |
| Cost of sales | | | | | | | 39,557 |
| | 35,283 |
| |
| Gross profit | | | | | | | 39,142 |
| | 33,593 |
| |
| | | | | | | | | | | |
| Selling, general and administrative expenses | | | | | | | 25,067 |
| | 22,975 |
| |
| Amortization expense | | | | | | | 407 |
| | 559 |
| |
| Total operating expenses | | | | | | | 25,474 |
| | 23,534 |
| |
| | | | | | | | | | | |
| Operating income | | | | | | | 13,668 |
| | 10,059 |
| |
| | | | | | | | | | | |
| Other (income) expense: | | | | | | | | | | |
| Interest expense | | | | | | | 1,840 |
| | 5,324 |
| |
| Extinguishment of debt | | | | | | | — |
| | (60,093 | ) | |
| Other expense | | | | | | | 461 |
| | 30 |
| |
| Foreign exchange gain | | | | | | | (438 | ) | | (7,732 | ) | |
| Total other (income) expense | | | | | | | 1,863 |
| | (62,471 | ) | |
| | | | | | | | | | | |
| Income before income tax provision | | | | | | | 11,805 |
| | 72,530 |
| |
| Income tax provision | | | | | | | (3,313 | ) | | (11,822 | ) | |
| | | | | | | | | | | |
| Net income | | | | | | | 8,492 |
| | 60,708 |
| |
| Noncontrolling interest in income from consolidated subsidiary | | | | | | | (6 | ) | | — |
| |
| | | | | | | | | | | |
| Net income attributable to Synventive Acquisition Inc. and Subsidiaries | | | | | | | $ | 8,486 |
| | $ | 60,708 |
| |
| | | | | | | | | | | |
See notes to consolidated financial statements.
Synventive Acquisition Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Month Periods Ended June 30, 2012 and July 2, 2011
(Dollars in thousands)
(Unaudited) |
| | | | | | | |
| | 2012 | | 2011 |
| Cash flows from operations: | | | |
| Net income | $ | 8,492 |
| | $ | 60,708 |
|
| Adjustments to reconcile net income to net cash provided by | | | |
| Operating activities: | | | |
| Depreciation | 1,848 |
| | 1,440 |
|
| Amortization of intangibles | 407 |
| | 559 |
|
| Non-cash interest expense | 42 |
| | 3,420 |
|
| Foreign exchange gain on debt | (438 | ) | | (7,732 | ) |
| Stock compensation | 152 |
| | — |
|
| Noncash gain on cancellation of debt | — |
| | (64,514 | ) |
| Gain on sale of equipment | (1 | ) | | (4 | ) |
| Deferred income taxes (benefit) | (33 | ) | | 12,463 |
|
| Changes in assets and liabilities: | | | |
| Bank acceptances | (926 | ) | | (777 | ) |
| Accounts receivable, net | (4,097 | ) | | (3,308 | ) |
| Inventories, net | 620 |
| | (2,515 | ) |
| Prepaid expenses and other current assets | (510 | ) | | (734 | ) |
| Accounts payable and accrued expenses | (5,184 | ) | | 1,801 |
|
| Related party payable | 125 |
| | 417 |
|
| Customer deposits | (62 | ) | | (344 | ) |
| Net cash provided by operating activities | 435 |
| | 880 |
|
| | | | |
| Cash flows from investing activities: | | | |
| Purchases of property and equipment | (1,177 | ) | | (1,915 | ) |
| Proceeds from the sales of property and equipment | 107 |
| | 51 |
|
| Net cash used in investing activities | (1,070 | ) | | (1,864 | ) |
| | | | |
| Cash flows from financing activities: | | | |
| Principal payments on long-term debt | (1,796 | ) | | — |
|
| Principal payments on capital leases | (72 | ) | | (87 | ) |
| Change in restricted cash | — |
| | 219 |
|
| Proceeds on revolving line of credit | — |
| | 1,300 |
|
| Net cash used in financing activities | (1,868 | ) | | 1,432 |
|
| | | | |
| Effect of foreign currency exchange rate changes on cash | (726 | ) | | (423 | ) |
| | | | |
| Net decrease in cash | (3,229 | ) | | 25 |
|
| | | | |
| Cash and cash equivalents, beginning of year | 11,194 |
| | 5,563 |
|
| | | | |
| Cash and cash equivalents, end of period | $ | 7,965 |
| | $ | 5,588 |
|
| | | | |
| Supplemental disclosure of other cash flow information: | | | |
| | | | |
| Stock issued in exchange for debt cancellation | — |
| | 49,668 |
|
| | | | |
See notes to consolidated financial statements.
Synventive Acquisition Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income (Loss)
June 30, 2012 and December 31, 2011
(In thousands, except for share information)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Synventive Acquisition, Inc. and Subsidiaries | | | | |
| | | | | | | Accumulated | | | | |
| | | | | | | Other | Noncontrolling | Total | | |
| | Common Stock | Paid In | Notes | Accumulated | Comprehensive | Interest in | Stockholders' | | Comprehensive |
| | Shares | Amount | Capital | Receivable | Deficit | Loss | Subsidiary | Equity (Deficit) | | Income (Loss) |
| January 1, 2011 | 1,370 |
| $ | 129 |
| — |
| $ | (124 | ) | $ | (101,510 | ) | $ | (1,773 | ) | $ | 102 |
| $ | (103,176 | ) | | $ | — |
|
| Net income | — |
| — |
| — |
| — |
| 69,245 |
| — |
| 74 |
| 69,319 |
| | 69,319 |
|
| Debt and equity restructuring | 604,319 |
| (123 | ) | 49,791 |
| 124 |
| — |
| — |
| — |
| 49,792 |
| | — |
|
| Stock compensation | — |
| — |
| 127 |
| — |
| — |
| — |
| — |
| 127 |
| | — |
|
| Other comprehensive income (loss) | | | | | | | | | | |
| Foreign currency translation | — |
| — |
| — |
| — |
| — |
| (6,156 | ) | (5 | ) | (6,161 | ) | | (6,161 | ) |
| December 31, 2011 | 605,689 |
| 6 |
| 49,918 |
| — |
| (32,265 | ) | (7,929 | ) | 171 |
| 9,901 |
| | $ | 63,158 |
|
| Net income | — |
| — |
| — |
| — |
| 8,486 |
| — |
| 6 |
| 8,492 |
| | 8,492 |
|
| Stock compensation | — |
| — |
| 152 |
| — |
| — |
| — |
| — |
| 152 |
| | — |
|
| Other comprehensive loss | | | | | | | | | | |
| Foreign currency translation | — |
| — |
| — |
| — |
| — |
| (804 | ) | (33 | ) | (837 | ) | | (837 | ) |
| June 30, 2012 | 605,689 |
| $ | 6 |
| 50,070 |
| $ | — |
| $ | (23,779 | ) | $ | (8,733 | ) | $ | 144 |
| $ | 17,708 |
| | $ | 7,655 |
|
| | | | | | | | | | | |
See notes to consolidated financial statements.
Synventive Acquisition Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands)
| |
| 1. | NATURE OF OPERATIONS AND BASIS OF PRESENTATION |
Synventive Acquisition Inc. and its subsidiaries (the "Company") are engaged in the business of designing, engineering and manufacturing hot runners that are used in molding processes for plastic and composite parts. The Company also provides parts and services for its installed equipment.
The accompanying unaudited consolidated balance sheet and the related unaudited consolidated statements of income, stockholders' equity and cash flows have been prepared in accordance with generally accepted accounting principles for interim financial information. The consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated financial statements include the accounts of Synventive Acquisition, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments, normal recurring accruals considered necessary for a fair presentation, have been included.
The unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the years ended December 31, 2011 and 2010 as included as Exhibits 99.1 to the Current Report on Form 8-K/A of Barnes Group, Inc. to which these statements are included as an exhibit.
Inventories consisted of the following as of June 30, 2012 and December 31, 2011:
|
| | | | | | | | |
| | | June 30, 2012 | | December 31, 2011 |
| | |
|
| | |
| Raw materials | | $ | 2,351 |
| | $ | 4,143 |
|
| Work in progress | | 2,642 |
| | 1,898 |
|
| Finished goods | | 4,844 |
| | 4,416 |
|
| | | $ | 9,837 |
| | $ | 10,457 |
|
On May 5, 2011, the Company, its lenders and its owners entered into a master settlement and restructuring support agreement. Under the terms of the agreement, the Series A and B Senior Subordinated Note holders converted 100% of the subordinated notes plus accrued interest to common stock in Synventive Acquisition, Inc. Simultaneously, one of the Series A Note holders exchanged $30,634 of their senior term debt for common stock. The Company's balances of the subordinated notes and senior term debt, prior to the debt restructuring, were $49,000 and $90,634, respectively. The subordinated notes and senior term debt balances were $0 and $60,000, respectively, following the debt restructuring. The senior term debt was originally denominated in Euros, however it was denominated in US dollar and British Pound Sterling following the restructuring. The restructuring resulted in a gain on extinguishment of debt during the six months ended July 2, 2011 of $60,093. The gain was reduced by lender, legal and financial advisor costs incurred in connection with the restructuring that totaled $4,421 during the six months ended July 2, 2011.
Interest expense was $1,840 and $5,324 for the six months ended June 30, 2012 and July 2, 2011. The interest expense related to the senior debt was $1,723 and $1,835 during the 2012 and 2011 periods. The interest on the subordinated notes, which were also canceled on May 5, 2011, was $0 and $3,420 during the 2012 and 2011 periods. Foreign exchange gains were $438 and $7,732 during the six months ended June 30, 2012 and July 2, 2011. The foreign exchange gain of $7,732 in the 2011 period includes a gain of $7,938 that resulted from the senior term debt while it was Euro denominated.
The Company's effective tax rate for the first six months of 2012 was 28.1%. In 2011 the Company's effective tax rate was 16.3% in the first six months of the year and 14.6% for the full year. The tax rate for the first six months of 2011 includes $10,643 of discrete tax expense related to pre-tax income of $64,514 from the extinguishment of debt ($60,093 net of related fees). The increase in the 2012 effective tax rate was driven primarily by the absence of the discrete item as well as the change in the forecasted mix of earnings attributable to higher taxing jurisdictions or jurisdictions where losses cannot be benefited in 2012.
On August 27, 2012, the Company was sold to Barnes Group Inc. ("Barnes Group”) pursuant to the terms of the Stock Purchase Agreement dated as of July 16, 2012 among Barnes Group, the Company, the stock and option holders of the Company, and Cetus Capital, LLC, in its capacity as Seller Representative (the "Stock Purchase Agreement"). Pursuant to the terms of the Stock Purchase Agreement, Barnes Group acquired all of the issued and outstanding shares of capital stock of the Company for an aggregate purchase price of $351,620, consisting of $306,083 in cash (including cash acquired of $9,366) and the assumption of $45,537 of debt.
Subsequent events have been evaluated through November 9, 2012, which is the date the financial statements were available to be issued.
